The goal is “to improve access to care and increase the quality and breadth of health care services available to people throughout central Pennsylvania,” as well as strengthen teaching and research, said the joint announcement.

The two organizations are in the process of selecting an independent third-party firm to help explore potential opportunities for the two health care organizations to expand their relationship. The evaluation process is to be finished by the end of March 2014.

Whether a merger will be part of the discussions is not certain, and further comment from the hospital systems was not available Wednesday, said Scott Gilbert, Penn State Hershey spokesman. “We are saying we’re excited about the possibility of a collaboration. That’s all we know,” Gilbert said.

Smaller health systems are finding that greater size is needed to
attain cost efficiencies, bargaining power with insurers and the
resources needed to invest in new technology.

View full sizeA new PinnacleHealth hospital is under construction near Fredricksen Outpatient Center in Hampden Twp. The $100 million facility is expected to open in mid-2014.
Christine Baker | cbaker@pennlive.com, file

“I believe that
these two health systems bring complementary strengths to the goals of
improving the health status of the population we serve and in delivering
more cost effective, high quality and accessible health care services
to the region,” said Michael A. Young, president and CEO of PinnacleHealth. Both are “vibrant health systems offering a
broad spectrum of health-care services, technologies, research
capabilities and facilities,” he said.

“In general we are seeing
to some degree a trend toward this, of certain affiliations of some
type to better meet the needs of their communities,” said Roger
Baumgarten, spokesman for the Hospital Association of Pennsylvania. “The
potential is there to offer better coordination, greater breadth of
care in the affiliated group, with more efficiencies,” Baumgarten said.

Asked
what the potential negatives are, Baumgarten cited the Penn
State-Geisinger merger of the late 1990s. “It didn’t work out,” he said.
The 1997 merger lasted less than three years, with both sides citing a
“culture” clash between one entity that focused on research and
teaching, and the other on clinical care and the bottom line.

“There are no guarantees, but they are pursuing it and doing what they
feel will be in the best interest of patients and communities,”
Baumgarten said.

Dr. Harold Paz, Penn State Hershey CEO and dean of the Penn State College of Medicine, said in the announcement that “given our past success in working together, it makes sense for us to explore additional opportunities.”

In September, as Penn State Hershey reported income topping $1.3 billion, with a $112 million margin, Paz said, “We must be willing to take risks in order to be successful.”

“We've been tremendously successful in recent years,” Paz said. “But (we) can't be content to rest on our success.” Paz said he would be looking for $125 million in new revenue and cost savings over the next three years by growing the medical center's market, reducing supply chain costs and increasing staff efficiency.

PinnacleHealth and Penn State Hershey already have forged several collaborations.

In 2008 they formed the Pennsylvania Psychiatric Institute, which includes a 74-bed hospital and three outpatient practices providing mental health services.

In 2010, the two organizations signed an affiliation agreement expanding their academic partnership. For more than 10 years, PinnacleHealth hospitals have been a training site for Penn State Hershey residents, fellows and medical students. PinnacleHealth residents also complete elective rotations at Penn State Hershey in several medical disciplines.

Penn State Hershey and PinnacleHealth are part owners of Horizon Healthcare Services, a home infusion agency.

The two health systems worked together on a joint community health needs assessment in 2012 that examined health disparities and ways to improve health and wellness in the midstate.

Gilbert said the news was going through “the internal communications process since last week.” Pinnacle employees were informed by email today.

Teamsters Local 776, which represents 935 Penn State Hershey employees, is monitoring the developments, said Herb Garber, the business agent for the Teamsters who work at Penn State Hershey. “We have no indication at this point in time what effect that would have on the employment status of any of our members,” he said.

A new contract was recently approved that runs through June 30, 2016. “It provides members with some guarantee of job security. So we don’t see any kind of an issue going forward,” Garber said. The Local includes workers in technical service, housekeeping, food service, laundry and more.

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